New Measures to Guide Banks and Asset Managers in Supporting High-Emitting Sectors’ Decarbonization Efforts
The Monetary Authority of Singapore (MAS) has proposed new guidelines for financial institutions (FIs) to better support the transition to a low-carbon economy. These guidelines, aimed at banks, asset managers, and insurers, were unveiled on October 18, 2023, to help institutions navigate the global push toward net-zero emissions. The proposals emphasize the importance of guiding customers, particularly in high-emitting sectors, towards decarbonization rather than withdrawing credit.
MAS advocates that financial institutions should engage with their clients to help transition their business models to lower emissions, instead of simply divesting from high-emission companies. This is essential to ensure that businesses with credible transition plans have the financing they need to meet their climate goals, preventing delays in the broader economic transition to sustainability.
The guidelines suggest that financial institutions should not penalize short-term increases in financed emissions, provided these investments are part of a credible transition plan aimed at long-term improvements. MAS also proposes that institutions should take a multi-year approach to assess climate-related risks and adopt a more integrated risk assessment model, considering factors like biodiversity loss and nature capital.
Additionally, the consultation encourages financial institutions to communicate their transition strategies clearly through sustainability reports and general-purpose financial statements, increasing transparency and credibility. The public consultation on these proposals is open until December 18, 2023.
MAS Managing Director Ravi Menon stressed that divestment alone will not achieve a net-zero world. Instead, financial institutions should actively help their clients decarbonize and progressively move towards sustainability, even if it involves temporary increases in carbon emissions.
